For Foreigners, Pitfalls Abound

Despite a surge in investment and optimism about its economic prospects, China remains a difficult place for foreigners to do business.

American Standard, which made the Chinese President's whirlpool bathtub, says it is now making money at its joint venture in this small southern city, 40 miles north of Guangzhou. But in its first few years it lost money, and like other American ventures it faced an army of unexpected challenges.

Transporting goods is a constant headache in China, for trains and ships are often booked up and roads are jammed with trucks. It can take up to six weeks to ship toilets the 700 miles to Shanghai from Qingyuan, which is near Guangzhou.

Banks in this city do not know what traveler's checks are, so they don't accept them. When company executives first inquired about opening a letter of credit, a routine form of payment, the bank had never heard of such a thing. Another problem is the current shortage in the supply of dollars at the official swap centers. This may crimp imports and make it costly for companies to convert local currency profits into dollars. Friction With Partners

Disagreements and friction with Chinese partners in a joint venture are common. Here at American Standard, executives say the previous Chinese joint-venture partner bogged down decision-making with bureaucratic second-guessing and complained that the Americans were spending too much money when they went out for hamburgers in the hotel coffee shop.

Finding able employees can also be difficult, a legacy of four decades of lax standards at state-owned companies. Some employees sleep, gamble, drink or fight on the job, and the company had to dismiss an employee who would not stop playing cards when he was supposed to be working.

An error has occurred. Please try again later.

You are already subscribed to this email.

Then in December, city officials told American Standard that it would no longer be able to use ground water. Instead, the factory would have to tap into city water, with a connection fee of $18,000 in addition to monthly charges. The officials were approaching all the joint ventures and state enterprises in the city to propose water connections, and executives thought it had more to do with a need for money than a water shortage. 'The Hidden Costs'

"The hidden costs of running a joint venture are very high," said Ronnie Y. Cheong, a soft-spoken 40-year-old Singaporean Chinese who is head of American Standard's factory here. "The problems will get more serious. They will have to find more ways of making money."

Local officials are not the only ones trying to extract extra money. The Singer Sewing Machine Company's joint-venture operation in Guangzhou receives three to four letters a month from big Chinese department stores that stock Singer's products. The announcements inform Singer that they are planning store-wide promotions and would appreciate "any assistance" -- meaning $500 donations.

"You have to pay," said Jeremy Watson, Singer's general manager here. "How can you not? I call it a tax, in brackets."

We are continually improving the quality of our text archives. Please send feedback, error reports,
and suggestions to archive_feedback@nytimes.com.

A version of this article appears in print on February 15, 1993, on Page A00006 of the National edition with the headline: For Foreigners, Pitfalls Abound. Order Reprints|Today's Paper|Subscribe